George Osborne confirms budget surplus law

The chancellor confirmed the plans for a “balanced budget” principle, which will be overseen by the Office for Budget Responsibility.

Mr Osborne justified the tougher regulations by arguing that the general election result represented a “comprehensive rejection of those who argued for more borrowing and more spending”.

Under the rules it is expected that ministers will spend less than comes into the public coffers when the economy is running “normally”, as defined by the OBR. Details of the scheme will be released in the budget next month.

‘Fix the roof’

“Without sound public finances there can be no lasting economic security – and without economic security there can be no lasting economic prosperity,” Mr Osborne said.

“So the new settlement for the British economy I talk about starts with a new settlement in the way we manage our national finances.

“With our national debt unsustainably high, and with the uncertainty about what the world economy will throw at us in the coming years, we must now fix the roof while the sun is shining.

“Indeed we should now aim for a permanent change in our political debate and our approach to fiscal responsibility – just as they have done in recent years in countries like Sweden and Canada.”

‘Uncertain future’

Mr Osborne has said that the government will be running at a surplus by the end of 2018. The laws are a challenge to Labour – criticised for borrowing too much when in power.

“In normal times, governments of the left as well as the right should run a budget surplus to bear down on debt and prepare for an uncertain future,” Mr Osborne will say.

“In the budget we will bring forward this strong new fiscal framework to entrench this permanent commitment to that surplus, and the budget responsibility it represents. I trust this new settlement for responsible public finances will now command broad support.”

‘Distraction techniques’

Shadow chancellor Chris Leslie said: “We need to deal with the deficit, and no-one would disagree with a surplus when economic circumstances allow or that investment is needed if the economy is in a downturn.

“But rather than giving speeches full of distraction techniques, the chancellor should be focusing on driving up productivity, setting out how he will pay for his multi-billion-pound election pledges and explaining who will bear the burden of the still unexplained cuts planned.

“Sensible reductions in public spending and a balanced approach are needed, but the public need straight answers from the chancellor now rather than politics.”